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in office factory, sales field or other workgroup or areas of activity.
Rank and File
• The responsibilities of the persons belonging to this group are even more restricted and more specific than those of the foreman.


A Client is the highest-level element of all organizational units in SAP R/3 system. The client can be an enterprise group with several subsidiaries. An SAP client has its own master data (Data which is used long-term in the R/3 System for several business processes such as customers, materials, and vendors master data). In SAP, a client is represented by a unique 3-digit number.
A Company Code is a unit included in the balance sheet of a legally-independent enterprise. Balance sheets and Profit and Loss statements, required by law, are created at company code level. The Company Code is the smallest organizational unit for which we can have an independent accounting department within external accounting, for example, a company within a corporate group (client). In SAP, a company code is represented by a unique 4-digit alpha-numeric for a specific client. It is the central organizational element of Financial Accounting. At least there is one company code in a client. We can set up several company codes in one client in order to manage various separate legal entities simultaneously, each with their own balanced set of financial books. Besides company code, in FICO module there is also another important organizational unit which is Controlling Area. The Controlling Area is the business unit where Cost Accounting is carried out. Usually there is a 1:1 relationship between the controlling area and the company code. For the purpose of company-wide cost accounting, one controlling area can handle cost accounting for several company codes in one enterprise.
• A plant is the place of production or simply a collection of several locations of material stocks in close physical proximity. A plant is represented by a unique 4-digit alpha-numeric for a specific client. Plant is used in Material Management (MM), Production Planning (PP), and Plant Maintenance (PM) module. A plant is assigned to one company code.
A Storage Location is a storage area comprising warehouses in close proximity. A Storage Location is represented by a unique 4-digit alpha-numeric for a specific plant. Material stocks can be differentiated within one plant according to storage location (inventory management). Storage locations are always created for a plant.

From MM perspective there another important organizational unit: Purchasing Organization.

It’s an organization unit that has responsibility to company’s purchasing requirements. It negotiates purchasing conditions (price, discount, and other things) with vendors. A Purchasing Organization is represented by a client-unique 4-digit alpha-numeric.

A company can have one or more purchasing organizations.

If a company centralizes its purchasing activities, it only needs one purchasing organization. It means that it only has one purchasing condition for a material with a vendor at a certain time.

If a company decentralizes its purchasing activities, it will need more than one purchasing organizations. It means that it can have more than one purchasing conditions for a material with a vendor at a certain time. For example, after negotiating with a vendor, a head quarter purchasing organization buys a material with 100 USD price. That company has a branch at other state/region that is assigned to other purchasing organization. The branch can purchase the same material to the same vendor, for some reasons, with different price e.g. 105 USD.

Facts about Purchasing Organization

A purchasing organization must be assigned to one or more plants.

A purchasing organization can be assigned to one company code.

A purchasing organization can also exist without being assigned to a company code. Since each plant must be assigned to a company code, the company code can be determined via the plant.

One plant can have one or more Purchasing Organizations.

Each purchasing organization has its own info records and conditions for pricing.

Each purchasing organization has its own vendor master data.

Each purchasing organization evaluates its own vendors using MM Vendor Evaluation.

Possible organizational forms of Purchasing Organization in a SAP client:

• Corporate-group-wide purchasing
A purchasing organization is responsible for the purchasing activities of different company codes.
In this case, we do not assign a company code to the purchasing organization. We assign plants from different company codes to the purchasing organization.
• Company-specific purchasing:
A purchasing organization is responsible for the purchasing activities of just one company code.
In this case, we assign a company code to the purchasing organization. The purchasing organization may procure only for this company code. we assign only plants of the company code concerned to the purchasing organization.
• Plant-specific purchasing:
A purchasing organization is responsible for the purchasing activities of one plant.
In this case, we assign the plant and the company code of the plant to the purchasing organization. The purc hasing organization may procure for this plant only.

…

Enterprise Structure

The Enterprise Structure in R/3 refers to the organizational structure of the Institution. The organizational elements in this structure allow encapsulation of configuration settings and data in each module. For example, the company code organizational element encapsulates the financial accounting settings and data in the financial accounting module for an enterprise.

Each element in the R/3 enterprise structure is defined below. The R/3 module in which each organizational element appears is given in parentheses next to its name. The proposed University of Tennessee organizational elements are given under each organizational element.

Client (Cross Application)
A client in R/3 is a technical entity containing configuration, master data and transactions for an organization. For example the organization may designate Client 100 in the production system PRD as the client in which data may be entered. Other clients may be used for development, testing and training.

Proposal: The University will have only one production client in the productive system – Client 100.

Company Code (Financial Accounting - FI)
The Company Code is the smallest organizational unit for which a complete self-contained set of accounts can be drawn up for purposes of external reporting.

Proposal: The University will use only one Company Code - UT.

Business Area (Financial Accounting - FI)
Business areas are units, within an institution, for which a balance sheet and income statement can be produced. In higher education, business areas are typically used to represent fund groups such as Current Unrestricted, Current Restricted, etc. for which balance sheets and income statements are required.

In addition to balance sheets by fund groups, the University of Tennessee requires a separate internal balance sheet and income statement for each budget entity such as Knoxville, Martin, Chattanooga, etc.

Proposal: The University will have business areas which represent a unique combination of Fund Group and Budget Entity. All existing fund groups and budget entities will be set up as business areas. For asset and liability entries, these business areas will be entered by users. For revenue and expenditure entries, these business areas will be automatically defaulted from cost centers and WBS Elements. The following is a sample partial list of business areas identified:


Fund Group Budget Entity Business Area
11 – Current Unrestricted Educational and General Funds 01 – Knoxville 1101
13 – Current Unrestricted Auxiliary Funds 01 – Knoxville 1301
21 – Current Restricted Educational and General Funds 01 – Knoxville 2101
23 – Current Restricted Auxiliary Funds 01 – Knoxville 2301
30 – Endowment Funds 01 – Knoxville 3001
40 – Life Income Funds 01 – Knoxville 4001
45 – Annuity Funds 01 – Knoxville 4501
51 – Unexpended Plant Fund 01 – Knoxville 5101
52 – Plant Funds for Retirement of Indebtedness 01 – Knoxville 5201
53 – Plant Funds for Renewal and Replacement 01 – Knoxville 5301
54 – Invested in Plant Funds 01 – Knoxville 5401
60 – Loan Funds 01 – Knoxville 6001
90 – Agency Funds 01 – Knoxville 9001
11 – Current Unrestricted Educational and General Funds 02 – Space Institute 1102
16 – Current Unrestricted Hospital Funds 04 - Chattanooga 1604
26 – Current Restricted Hospital Funds 04 – Chattanooga 2604


Functional Area (Financial Accounting - FI)
The Functional Area is an organizational unit in Accounting that classifies the expenditures of an organization by function.

Proposal: The University will use functional areas to enable reporting by function. These functional areas will be defaulted from cost centers and WBS Elements. The following is a sample list of functional areas:

Function Code Functional Area
01 – Instruction 1010
02 – Research 1020
03 – Public Service 1030
04 – Academic Support 1040
05 – Student Services 1050
06 – Institutional Support 1060
07 – Operation and Maintenance of Physical Plant 1070
08 – Scholarships and Fellowships 1080
09 – Auxiliary Enterprises 1090
10 – Hospitals 1100
11 – Staff Benefits 1110
12 – Other Expenditures 1120
13 – Service Centers 1130


Figure 1 shows the financial accounting structures.


Figure 1

Controlling Area (Controlling - CO)
A Controlling Area in R/3 is the organizational unit within an institution, used to represent a closed system for cost accounting purposes. A controlling area may include one or more company codes which must use the same operative chart of accounts as the controlling area.

Proposal: The University of Tennessee will use only one Controlling Area – UT. Company Code UT will be assigned to Controlling Area UT.


Funds Management Area (Funds Management - FM)
A Funds Management Area in R/3 is the organizational unit within an institution, used to represent a closed system for funds management and budgeting. A Funds Management Area may include one or more company codes and one or more controlling areas.

Proposal: The University of Tennessee will use only one Funds Management Area – UT. Company Code UT and Controlling Area UT will be assigned to Funds Management Area UT.

Figure 2 shows the relationship between the Company Code, the Controlling Area and the Funds Management Area.


Figure 2


Master Data

Master data structures in R/3 represent data relating to individual objects, which remain unchanged over an extended period of time. This allows such data to be created once and used many times. Master data is also used to validate and classify transaction data for reporting.

Financial Accounting Master Data (FI)


Chart of Accounts
The Chart of Accounts is a collection of general ledger accounts. Each company code is assigned to a chart of accounts, and the controlling area is assigned to the same chart of accounts.

Proposal: Only one Chart of Accounts - UT will be used for the University of Tennessee. Company Code UT and Controlling Area UT will be assigned to Chart of Accounts UT.


General Ledger Accounts
The General Ledger Accounts (GL Accounts) are the structures that classify debit and credit values for accounting transactions in the FI module and form the basis for creating the balance sheets and income statements.

There are five types of General Ledger Accounts in R/3 - assets, liabilities, fund balances, revenues and expenditures. Asset, Liability and Fund Balance GL Accounts can be used, in combination with business areas to create internal balance sheets by business area.

Revenue and Expenditure GL Accounts represent the highest level at which revenues or expenditures are recorded by the Institution. They can be used in combination with business areas and functional areas to create income statements by function and business area. Revenue and expenditure can also be further broken down in the Controlling module.

Figure 3 shows the relationship between the chart of accounts and the company code:


Figure 3

Proposal: At the University of Tennessee several different existing codes will be